Author: Metrics Ventures

Metrics Ventures September Market Observation Guide for the Crypto Market Secondary Fund:

1/ Recently, Bitcoin has continued to fluctuate between 50,000 and 60,000, with market sentiment remaining low. Daily trading volume has hit new lows, fees continue to be negative, and the Ethereum exchange rate has once again fallen to a new low, indicating that the market has entered a freezing point. Altcoins have rebounded somewhat after the FOMC broke the emotional freeze, but they are still driven by a vacuum of chips, and market trading volume remains sluggish.

2/ Continuing from last month's analysis, altcoins are generally in a consolidation phase after a pullback from the highs of March/April. However, the accumulation of time in the chip dynamics is crucial, and we have yet to observe signs of altcoins being ready in bulk. It is worth noting that many targets have not formed effective distributions and have passively pulled back to low points, which means that market makers still have the motivation to maintain prices or drive a rebound in the short window after the emotional freeze. This may be a positive signal.

3/ From the current perspective, we believe that the international risk market has released risk for the first time since August. Although some altcoins have shown decent recovery trends this month, we believe that crypto assets still need time to build strength. Currently, the market will continue to be in a state of disorderly fluctuations. Looking ahead, we believe that the adjustment and accumulation this year will serve as a good foundation for next year's market, and there is no need to worry excessively about the volatility of the market.

Overview and Commentary on Overall Market Trends:

This month, the market performance has been flat, with the hotspots for speculation and their duration being weaker than at the beginning of 2023. The market is once again widely discussing the issues of blockchain-native innovation represented by Ethereum and its penetration rate facing obstacles. From a certain perspective, the current level of sentiment is even lower than in 2019. Following the FOMC, sentiment has eased somewhat, and some altcoins have shown decent recovery trends, but the market still lacks focus and trading volume remains low.

Looking back at the trends, Bitcoin has continued its disorderly wide fluctuations since April. This is mainly due to the simultaneous shrinkage of trading volume, market attention, and risk appetite. It is noteworthy that we are witnessing a disorderly wide fluctuation close to new highs, which confirms our consistent view—that we may be experiencing a unique cycle of major asset classes. From the perspective of altcoins, current market opportunities are mainly concentrated on chip games. This highlights the essence of the current narrative scarcity and weak internal driving forces within the industry. Aside from AI and Meme, there has yet to be a clear convergence of funds and main narrative trends. As we mentioned earlier, the market's pricing model and gameplay have gradually become recognized by more practitioners.

However, the characteristics of a reflexive market remain unchanged. If this trend continues, we may see a resurgence of pure speculation driven by narratives and chips, further highlighting the "casino" nature of the market. From the perspective of secondary market operations, grasping the escape window and choosing the right escape posture become increasingly important.

Overall, our focus will continue to revolve around waiting. The wide fluctuations will eventually end, at which point the risk-reward ratio for profiting through "buying low and selling high" will significantly decrease. Maintaining focus on the market and being able to identify turning points after market lows is the wiser choice.

Industry Development Trends:

1. The primary market VC is undergoing a severe reshuffle, with small and medium VCs clearing out, and many projects having a DPI of less than 1. In contrast, leading VCs continue to grow, rapidly completing a new round of financing within just five months. The primary market will exhibit an extreme polarization trend in the future. Aside from leading VCs, only incubators focused on early-stage projects with unique tastes or vertical VCs concentrating on specific ecosystems can find survival space in the market by leveraging ultra-high odds and competitive advantages in vertical fields.
2. The most discussed application tracks are SocialFi and AI Crypto. The implementation of AI faces hard obstacles, requiring a wait for key technological breakthroughs. Pumpfun is the most successful SocialFi case, while the truly suitable SocialFi for Web3 is not a Web3 version of Twitter, but rather a socialized casino.
3. BTC, stablecoins/payments, and casinos are currently the only proven effective business models in the industry. Stablecoins have become the new "roll king" track in the primary market, but no one can clearly explain how to break Tether's network effect. The development trends in the industry are becoming increasingly clear; aside from BTC, the ultimate business model for Web3 is a casino.
4. Quantitative returns continue to be under pressure, with many quantitative teams transitioning from the A-share market flooding into the crypto market. However, considering the current overall scale of the quantitative market compared to active trading liquidity, quantitative returns are expected to shrink further. At the same time, we should be wary of high-leverage quantitative strategies, as the risk of liquidation for these strategies is continuously rising in extreme market conditions.

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